MARLBOROUGH LINES LTD - LINES BUSINESS

NOTES TO THE FINANCIAL STATEMENTS

For the Year Ended 31 March 2003

1. STATEMENT OF ACCOUNTING POLICIES
   These financial statements have been prepared in accordance with, and for the sole purpose of, the requirements of regulation 6 of the Electricity (Information Disclosure) Regulations 1999 and amendments to those regulations.

Accordingly these financial statements are for the Line Business Activities of Marlborough Lines Limited consolidated with OtagoNet. Marlborough Lines’ Contracting and Investment activities, with their associated revenue and costs, have been removed from these Financial Statements in accordance with the Regulations.

These accounts are not comparable with the consolidated financial statements prepared and published with the Company’s Annual Report. These accounts cannot and should not be used to assess the actual performance of the Company as they are prepared for the sole purpose of meeting the requirements of the regulations. The contracting and other business activities which are removed from these accounts are required to function separately and produce commercial rates of return but will continue to be a core part of Marlborough Lines’ activities.

The financial statements have been prepared on the basis of historical cost with the exception of certain items for which specific accounting policies are identified.

1.1 Financial Statements

On 1 July 2002 Marlborough Lines’ Investment Business, through its wholly owned subsidiary Southern Lines Limited, purchased a 51% share in the unincorporated joint venture OtagoNet. OtagoNet is a Balclutha-based lines business. Thus, under S3 of the regulations, a prescribed business relationship exists between Marlborough Lines and OtagoNet.

In accordance with sections 7 and 8 of the regulations these financial statements are a 100% consolidation of Marlborough Lines’ ‘Lines’ Business financial statements for the year and OtagoNet’s financial statements for the nine months from 1 July 2002 to 31 March 2003. While meeting the requirements of the Regulations this treatment does not comply with generally accepted accounting practice.

The statutory financial statements published with the company’s annual report reflected a proportional (51%) consolidation of OtagoNet as required by SSAP25 – “Accounting for Joint Ventures”. The impact on the financial statements of the different treatments of consolidating OtagoNet is summarised below:

Comparative figures for 2002 relate to the ‘Lines’ business of Marlborough Lines Limited only.

The activities of the Parent have not been separately disclosed in these financial statements as that is not required under the Regulations. Again this represents a departure from generally accepted accounting practice.

1.2 Goodwill

The excess cost over the fair value at the date of acquisition of the assets of the unincorporated joint venture is capitalised as goodwill and amortised on a straight-line basis over the period of expected benefit. This period has been assessed as 20 years from the date of acquisition. The carrying value for goodwill is reviewed annually and adjusted as considered necessary.

1.3 Goods And Services Tax (GST)

The statements of financial performance and cash flows have been prepared so that all components are stated exclusive of GST. All items in the statement of financial position are stated net of GST with the exception of receivables and payables, which include GST.